This chapter examines the recent history and current state of the electricity sector in Russia. I discuss the challenges facing this sector and options for their solution. The main focus is the wholesale electricity market. I consider its present structure and architecture and examine the market power of large energy producers. I survey the literature on market power analysis for electricity markets and discuss some theoretical problems related to this analysis. I particularly consider conventional measures of competitiveness and examine their application to electricity markets. Another section contains theoretical results and the data on forward markets, as well as their impact on the efficiency of wholesale electricity markets. I describe the scenarios of development of the capacity market in Russia and examine producer behavior while taking into account energy and capacity trades. I conclude with a discussion of the problems and future prospects of Russian electricity market.